Costs And Conduct In Financial Remedy Cases

• Published date: 08 September 2023
• Subject Matter: Litigation, Mediation & Arbitration, Family and Matrimonial, Family Law, Trials & Appeals & Compensation, Divorce
• Law Firm: Burgess Mee
• Author: Ms Leora Taratula-Lyons

Leora Taratula-Lyons examines recent case law on how costs are awarded in financial remedy proceedings following divorce.

Costs and conduct are more frequently mentioned in my financial remedy practice than ever before. There has been judicial movement away from the standard 'no order as to costs' (the general rule pursuant to FPR 28.3(5)), most notably and stringently by the recently retired Mostyn J. This encourages proportionality and sensible negotiations; something lost after the demise of the Calderbank offer, which can now only be employed in interim applications.

A more civil-style approach to costs is being taken in financial remedy applications and practitioners should warn clients of the potentially harsher outcomes. There is a public interest point to this progression too; the judiciary's time should not be overly burdened by unreasonable litigants, particularly when the court's backlogs are high for both finance and children matters.

There is regular judicial encouragement to ensure itigation conduct results in a costs order. In OG v AG [2020] EWFC 52, Mostyn J set out the four types of conduct and approach the courts should take in respect of each. Mostyn J signposted the revised wording of 4.4 of FPR PD28A, that a failure to negotiate reasonably and fairly when the financial landscape becomes clear, would result in a costs order. This assessment of conduct is broad; a party does not need to do something active, as the passive act of not negotiating is sufficient to satisfy the threshold. A disproportionate approach to the litigation generally would satisfy this test.

Costs orders as a quasi-remedy to litigation conduct now regularly feature in both sharing and needs cases.The case law varies from ultra-high-net-worth individuals (such as the recent example of Tsvetkov v Khayrova [2023] EWFC 130 and [2023] EWFC 131 where Peel J ordered the wife to pay 50 per cent of the husband's costs on an indemnity basis) to lower value needs cases (MB v EB [2019] EWHC 3676 where a costs order made against the husband due to his conduct meant he could not meet his needs).

In my recent practice, a needs case involving non-disclosure and litigation conduct resulted in costs being taken into account as part of the overall award, rather than as a separate order. Consequently, one party had a greater departure from equality in their favour awarded to reflect a notional costs order. Although the costs order was quantified, it was part of the lump sum ordered...